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Opening Remarks

President of Russia Dmitry Medvedev: Good afternoon, colleagues.

Today we are discussing one of the complex issues facing our economy – modernisation of our light industry, which is not in the best of conditions at present. One of the historical centres of our textiles industry is here in Ivanovo Region.

I would like to take this opportunity to congratulate the region’s residents and leadership on the ninetieth anniversary of its founding and wish them success in their economic and social development.

I want to note the timeliness and importance for the future of the issues that we will be discussing today. In terms of consumption levels, only the foodstuffs sector is ahead of light industry goods today. There is a lot of potential here. And the work of textiles factories is often decisive for the fate of entire towns and regions.

Ivanovo Region alone is home to two thirds of Russia’s cotton textiles production facilities. Fifty thousand people depend on the sector for their jobs. The governor and I talked about this just before. What this means, in essence, is that more than half the region’s population is in one way or another connected to the industry.

Demand for textiles has grown steadily over these last years. The experts say that this growth will continue in the near future.

At the same time, it is clear today that our textile industry is not able to satisfy even domestic demand. It depends largely on imports for its raw materials, and cotton fibre for the sector comes entirely from abroad.

Facilities and equipment are more than 50-percent worn out today. The equipment renewal coefficient in 2006–2007 was not more than 3–4 percent, while in developed countries it is at least 15–17 percent.

This outdated equipment prevents enterprises from producing modern fabrics. They are trying to keep up with modern trends and fashions, but they are not always successful. As a result, Russian goods lose out to imports not only in terms of price but also in design, ergonomics and quality.

Labour conditions at most enterprises are difficult. Wages are substantially lower than in other manufacturing sectors. The average wage in the sector today is a little more than 6,300 roubles a month.

We visited one enterprise in Ivanovo. Wages there are a little higher. This is good to see, of course, but it is unfortunately more the exception than the rule. It is not surprising that the number of workers in the sector fell by more than half over 1990–2008. The sector used to employ almost a million people, but now it employs 400,000 people. These are sad statistics, of course.

Steps have been taken lately to inject new life into the sector. The Government is carrying out the 2006–2008 programme of measures to develop light industry. This includes measures such as reducing customs duties on equipment imports and credit support measures. A number of regions have also drawn up their own pilot programmes for reviving the local textiles industry.

But fully overcoming the technological backwardness in the sector and reversing all the negative processes requires special measures. Today we will talk precisely about development priorities for the sector.

The state and the business community need to concentrate on the competitive niches in which we already have a hold today and in which we could become leaders.

Concentrating our efforts in this way will make it possible for us to achieve rapid progress in a number of areas, or at least will put in place the conditions for rapid progress. We need to work on integrating our textiles industry into the international labour system.

We just visited an exhibition, and at one of the stands we were talking about flax production and one of the directors of the relevant holding said that a few years ago, Russian flax had a 50–60 percent share of the European market, while today it is just 14 percent, while our Chinese partners, meanwhile, have increased their share to 60 percent.

The key priority is to fundamentally modernise the sector. We need to thoroughly overhaul production, introduce advanced technology and dramatically raise labour productivity. We need to draw on the experience of foreign companies that have achieved rapid success in transforming outdated enterprises into modern and highly efficient businesses.

I am referring to companies in China, Hong Kong, Germany, Italy and Turkey. Practically all of them have upgraded their textiles production equipment over the last decade, of course, with the help of state and private support measures.

Advanced technology, including nanotechnology, can be introduced very rapidly into the textiles industry today. Our colleagues are working on this and told me about what they are doing during our visit of the factory.

Encouraging investment is a strategic priority. High interest rates are making it hard to borrow money at the moment. This is a clear problem. Interest rates are high not just for the textiles industry, but businesses in the industry say they simply cannot afford such high rates.

I would like to hear your views today on the possibilities for increasing subsidised loans for the purchase of technical equipment for the sector.

Furthermore, as I discussed today with Mikhail Alexandrovich [Men, Governor of Ivanovo Region], and several other colleagues, a cluster approach such as that being used in a number of other economic sectors, coupled with new management methods, should be used in the transition to innovative development.

The development of industrial clusters in Ivanovo, Vologda, Kostroma and Yaroslavl Regions should provide the textiles industry with the modern engineering, technical, transport and social infrastructure it needs to produce completely new kinds of products.

Finally, the revival and development of flax production, production for which there is demand both at home and abroad, is especially important. Demand is perhaps even higher abroad, because purchasing power is higher there.

I would like to say a few words about another important issue — that of protecting Russian producers from illegal textile imports and textiles illegally produced on Russian territory. We realise that our textiles businesses find it practically impossible to compete against smuggled and counterfeit products. They end up in a losing situation from the outset.

According to data from the Economic Development Ministry and the Industry Ministry, these ‘shadow’ products account for almost 50 percent of the market. I think this is the average figure and that in some price categories the real figure could be higher. These products are very often of poor quality and even dangerous to use. In this respect, I hope the customs service and law enforcement agencies come up with concrete proposals to address this problem. We need to put an end to these ‘grey’ and quite simply illegal imports.

These are just a few of the issues we need to discuss today. I think that other questions will come up during our discussions.

The textiles industry is one of the oldest sectors in our country and one of the most promising sectors for our economy. It is very clear that we do have the possibilities today to bring about the sector’s recovery. Our task is to facilitate this through the decisions that will come out of today’s meeting.

Thank you for your attention.

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Concluding Remarks (excerpts)

President of Russia Dmitry Medvedev: Colleagues, let’s sum up now.

First, as is usual in our work, instructions will be issued following the meeting. They are already ready.

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What are the points I think it most important to make? Much has been said today about the relations between the chemicals industry (petrochemicals, gas-chemicals) and light industry, the textiles industry. This is indeed a very promising area for work, a very useful avenue to develop. We should take steps in this direction and this will definitely be reflected in the instructions. This is all the more important as we are talking about products with a high added value here, and it is precisely these kinds of products that can earn us money.

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As for a common comprehensive document, I also support the idea of drawing up an overall strategy, and I think it is time that we did this. It will be useful. If we are serious about reviving our textiles and light industry, we need to base our efforts on a general strategy, and not because this is a trendy term, but because we need to be able to see the general picture for the years ahead.

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Concerning measures to protect the domestic market, we need a comprehensive series of measures here. I will issue an instruction to the Government as a whole and specific instructions to the Interior Ministry, Federal Security Service, Justice Ministry and Customs Service to draw up the relevant proposals on protecting the domestic market. These proposals should concentrate on what specifically needs to be done to protect the market. We must be careful not to go too far, so as not to increase the burden on consumers. But we do need to resolve the problem of ‘grey’ imports and illegal production over the next few years. It will be very difficult to fully eradicate this problem, but it is within our possibilities to substantially reduce it. I address the representatives of the relevant ministries and agencies: we had a figure of 70% and now this is down to 50%, so we need to set realistic targets and bring the percentage of ‘grey’ and simply illegal imports down even further.

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I support the idea of state procurement orders and this will be reflected in the draft instruction.

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We should concentrate on what we do well, flax, for example. But we need to look at what we can do to support the southern regions in this respect. Wool production, for example, is a traditional business in the North Caucasus, and this is, of course, a source of raw materials for our textiles and light industry. This is something we need to work on.

What else do I want to say in conclusion? As in a number of other sectors, some people thought in the mid-1990s that Russia’s textiles and light industry was dead, that there was no point in working on this sector when all around us are others with world-famous brands (let the Chinese take care of the cheaper end and the Italians the premium end, but we won’t get involved). Practice has shown this to be a mistaken point of view. We are able to tackle as complex an issue as developing our textiles sector and light industry. We have the necessary instruments and financial possibilities at our disposal, and most important, we have a vision of what needs to be done.